A majority of Australians are underinsured according to the latest Underinsurance Research report by Rice Warner*.

The report found the median level of life insurance for working-age Australians covered only 47% of the financial needs (to maintain their standard of living) of remaining family members.

Here's a simple guide to stage-of-life insurance priorities:

Life stage - Early career

This can be a busy and social period, but if you are unable to work for two or three months, perhaps due to an injury on the ski slopes or an illness, how will you pay the rent and phone bills or save for a house deposit?

Income protection, plus a choice of Total and Permanent Disability (TPD) or Trauma insurance (explained below) could be considered. A Commonwealth Financial Planner can help figure out exact levels of cover required.

  • Income protection – pays some of your income if you’re unable to work due to sickness or injury, subject to a waiting period. . Premiums may be tax deductible
  • Total and Permanent Disability (TPD) – pays a lump sum in the event of total disablement resulting in being unable to work again. Generally, the insurer will pay a pre-agreed amount.  
  • Trauma insurance – pays a lump sum if you are diagnosed with a particular life-threatening illness covered by the policy.

Life stage - Family with young children

Priorities have shifted. Parents are making their way up the work ladder but there could be financial pressures including a mortgage, a second car and supporting the needs of young children.

What if you were suddenly unable to work, even for just a few months? What if an accident or illness meant you were no longer around to help care for their family? How would mortgage repayments, school fees and living costs be met? Suggestions for this period include a selection from the previous three covers – Income protection, TPD and Trauma - as well as Life insurance.

Life stage - Mature couples and mature singles

You are reaching retirement and hopefully have a sense of financial security. But this is arguably the most important stage for your own personal insurance. Building a retirement fund, paying down a mortgage and supporting older children while facing statistically increasing health issues mixes great freedom with enormous responsibility.

Life insurance could be your priority. Also consider a mix of Income Protection, TPD or Trauma. If you're mature and self-employed, consider Business overheads cover, which looks after fixed operating expenses if you can't work due to illness or injury.


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Things you should know

Commonwealth Financial Planners are representatives of Commonwealth Financial Planning PTY LTD ABN 65 003 900 169. This web page contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a financial planner before making a financial decision.

This web page has been prepared by Commonwealth Financial Planning Limited ABN 65 003 900 169, AFSL 231139, (Commonwealth Financial Planning) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Commonwealth Financial Planners are representatives of Commonwealth Financial Planning. Information in this web page is based on current regulatory requirements and laws as at 1st March 2019 which may be subject to change.

While care has been taken in the preparation of this web page, no liability is accepted by Commonwealth Financial Planning, its related entities, agents and employees for any loss arising from reliance on the information contained in the web page.